Royalties feasibility study shows quick payback (June 04, 2007)

Development of the Raglan South nickel deposits in the Nunavik region of far northern Quebec is economic, and high nickel prices shrink the project’s payback period substantially, says a feasibility study prepared for operator Canadian Royalties (CZZ-T).

The study considered three of the four deposits with known resources on the property — Ivakkak, Expo and Mesamax. The fourth, Mequillon, is now at the stage of a scoping study.

The study found a mine, a mill with a 3,500-tonne daily throughput, and infrastructure including roads and a port at Deception Bay, would have a price tag of $438 million. The project would produce 11,800 tonnes nickel, 17,600 tonnes copper, 14,500 oz. platinum and 78,600 oz. palladium, all in concentrates.

The overall project reserve is 11.3 million tonnes grading 0.97% nickel, 1.13% copper, 0.05% cobalt, 1.86 grams palladium, 0.45 gram platinum, and 0.1 gram gold per tonne. All three deposits would be mined by open pit, with some later-stage underground mining at Ivakkak.

Assuming US$13,200 per tonne (US$6 per lb.) for nickel, the base-case discounted cash flow analysis puts the project’s net present value at $400,000, at a discount rate of 8%, with a pre-tax internal rate of return at 11.3%. It would, however, pay back the capital cost in under three years.

Higher nickel prices increase the value and rate of return substantially, with a US$22,000 per tonne nickel price (US$10 per lb.) bringing the net present value to $285 million.

The study also fulfills the last requirement in Royalties’ option agreement with Ungava Minerals (UGVAF-O), bringing Royalties’ interest in the optioned part of the South Raglan land package to 80%.